What Greenville Health sale could mean for patients

Doctors in white Greenville Health System coats crowded into the Greenville County Council chambers Tuesday night to urge local leaders to drop support for a sale of the nonprofit system.
Anna B. Mitchell

With legislators proposing to sell Greenville Health System, patients in the Upstate are wondering how new ownership might impact the quality of care they receive.

Industry analysts say there is little to fear on that front, but they have other concerns about the sale itself.

Eight members of Greenville County’s legislative delegation introduced a bill last week that calls for selling GHS and dispersing the proceeds — which they estimate at between $2 billion and $3 billion — among various governmental, educational and other groups.

The legislators — state Sens. Tom Corbin and William Timmons, and Reps. Mike Burns, Bill Chumley, Dwight Loftis, Garry Smith, Leola Robinson-Simpson and Ashley Tranthum — said they took the step because public trust was shaken when GHS “unilaterally restructured and leased our publicly-owned, multibillion dollar asset without the legislative delegation’s input or consent as the law requires.”

GHS switched from a public nonprofit to a private nonprofit multi-regional health system in 2015. But the plan was opposed by the delegation members, who said it would end government oversight of public assets.

The hospital received about $82 million in county tax funds during the 1960s and 1970s to build parts of Greenville Memorial, Hillcrest Memorial, North Greenville Hospital and Allen Bennett Memorial.

Then last year, GHS announced it was affiliating with Palmetto Health to form the largest health care system in the state. That vexed the legislators as well.

Many changes

The sale of GHS could bring many changes, the analysts say. But health care quality isn’t likely to be among them.

Studies comparing quality of care between for-profit and nonprofit systems haven’t found a difference for the most part, said Paul Ginsburg, professor of health policy at the University of Southern California’s Schaeffer Center for Health Policy and Economics.

While a takeover could mean cuts in staff, that doesn’t necessarily translate into poorer quality of care, he said. It depends on how the staff is organized. Savings are typically realized through efficiencies, he said.

Patient care can actually improve under a new owner, said medical sociologist Emerson Smith, who is president of the Metromark Health Care Research Center in Columbia and a clinical research professor of internal medicine at the University of South Carolina Medical School.

But there’s almost always a disruption in care in such a transaction.

“The old way of care is almost always phased out and the new way of care slides into place,” he said. “It is the way that takes place, including how dramatic a change there is in personnel — nurses, doctors, medical techs — that leads to either a better or a worse environment of patient care after two or three years.”

There can also be disruption as the hospital adapts to new administrative methods, he said. In one case, he said, the buyer brought in a new patient portal system that wiped out the history of patient labs and procedures in the old portal.

In addition, Smith said, GHS has leadership with years of experience in South Carolina that a new owner wouldn't have.

But historically, he said, federal oversight of hospital takeovers typically means the same quality of care or an improvement.

Safety net

Columbia health care consultant Lynn Bailey agrees that studies show there is no difference in care between for-profit and nonprofit systems.

But, she added, for-profit systems tend to provide less charity care. So if GHS is taken over by a for-profit, it’s possible the safety net that provides care for uninsured residents could be affected, she said.

Still, for-profit hospitals that participate in Medicare and Medicaid are required by federal law to provide emergency care to uninsured patients, she said.

When hospitals are sold to a national or regional system, it’s usually because of financial problems, Smith said. In that case, the new owner infuses cash into the old system, which is good.

But if the hospital being acquired is in good financial condition, the buyer can either make no changes and keep the momentum going, or take the funds out of the hospital to use somewhere else in its system.

“However, hospitals in 2018 and into the future are going to be financially healthy only if they can show good outcomes,” he said. “Financially secure and financially stressed hospitals today will both have reimbursements based only on positive patient outcomes.”

Nationally, Smith said, the Federal Trade Commission and the Department of Justice report that fully competitive systems, even those that are large and cover many states, result in lower costs, higher outcome quality and more innovation.

Nonetheless, he said, if mergers continue at the current pace, hospitals might reach a point of noncompetitiveness, which could cause costs to rise while quality declines.

A flawed notion

But impact on health isn’t the only concern the analysts have about the proposed sale.

While the national trend has been toward converting public hospitals to private nonprofit ownership, the public hospitals are usually struggling financially, and their buildings and equipment are outdated, Ginsburg said.

And while there are lots of mergers among private, nonprofit hospitals — being a private nonprofit makes sense for hospitals that want to merge with other systems — they usually don’t involve a lot of money changing hands, he said.

Paul Ginsburg(Photo: Paul Ginsburg)

Instead, he said, they expect to be more successful working together.

Ginsburg said it’s hard to envision a private nonprofit system paying the kind of money the legislators expect to get for GHS. Only an investor-owned system like HCA would be able to come up with $2 billion, he said.

But buying financially healthy hospitals like GHS is not what investor-owned chains do, he said. And he knows of no examples where that much was paid for a hospital system.

The business model of investor-owned systems is to buy struggling, poorly managed hospitals — and not pay very much for them — with the expectation of managing them better and making money, he said.

Because GHS seems to be a strong organization, there would be fewer opportunities for an investor-owned company to run it better, Ginsburg said.

So the notion that there may be companies willing to buy GHS could be flawed to begin with, he said.

Loads of suits

There’s also the question of the hospital’s valuation, who built the current value and who is entitled to the increase in value, Ginsburg said.

The valuation comes not from the initial $82 million or what that amount would be worth today, but from capital the hospital has invested in the system over the years, he said.

“You could argue that the public’s investment was so long ago, the buildings would have had to be replaced since then. You could even argue that (the investment) has no value because it’s been spent,” he said. “I see loads of lawsuits here. It’s not a source of quick money for the state.”

Moreover, Ginsburg said, it’s hard to place a value on GHS because valuations are based on similar transactions and it would be hard to find another transaction like this.

The hospital’s debt would also have to be subtracted from the sales price, he said. GHS has some $640 million in bond indebtedness.

Lynn Bailey(Photo: Provided)

Meanwhile, Bailey said the sale “isn’t going anywhere,” because the bill was “sent to a committee where it will die.”

The bill is in the judiciary committee, which is bogged down with other matters and will be for probably a year.

'God and the Devil'

Furthermore, Bailey maintains that GHS can’t be sold because neither the Greenville County Council nor the legislative delegation owns or controls the hospital assets, bonds or licenses. The new corporation does.

“There are now legal connections between all these facilities. They have a single unified medical staff. And the system owns and operates medical practices and ambulatory surgery centers and so on. So what do you do?

"You can’t make those practices independent again because none of them own the medical records anymore. They're owned by the system,” she added. “You can’t unscramble those eggs.”

But Bailey said that even though the state Supreme Court refused to hear the original case about whether the restructuring was legal, she’s willing to bet the hospital will return to the high court over the sale legislation and that the court will take up the matter fairly quickly because it’s reached such a critical mass.

Len Nichols, director of the Center for Health Policy Research and Ethics at George Mason University, said there are examples of for-profit conversions that have worked out well and examples where local people ended up worse off. Results depend on the execution, the buyer and what they would do with the hospital.